The White House unveils U.S. President Donald Trump’s tax plan which would slash the U.S. tax rate on business profits to 15 percent, while also offering tax cuts to average Americans.
THE Trump administration has proposed slashing the number of tax brackets, abolishing death tax and eliminating most tax deductions for individuals.
White House economic adviser Gary Cohn said the plan would cut the top income tax rate from 39.6 per cent to 35 per cent.
It also would reduce the number of personal income tax brackets to three from seven.
The new tax rates would be 10 per cent, 25 per cent and 35 per cent.
The plan would double the standard deduction for married couples to $US24,000 ($32,124), while keeping deductions for charitable giving and mortgage interest payments.
The plan would trim other deductions used by high-income Americans, including state and local tax payments.
It would also repeal the estate tax, the catch-all alternative minimum tax and the 3.8 per cent tax on investment income from President Barack Obama’s health care law.
US Treasury Secretary Steven Mnuchin earlier said there was fundamental agreement with Congress on the goals of tax reforms
“This will pay for itself with growth,” he said. “We will have a lower debt to GDP ratio and see trillions of dollars in additional revenues.”
Mr Mnuchin said it would be “the biggest tax cut and the largest tax reform in the history of our country.”
The plan would also reduce investment and estate taxes aimed at the wealthy. But administration officials said that action on other key tax code elements would ensure the plan would largely help the middle class instead of the affluent.
The plan will also include child-care benefits, a cause promoted by Mr Trump’s daughter Ivanka.
Asked by a reporter, Mr Mnuchin said Mr Trump “has no intention” of releasing his own personal tax returns to the public.
Mr Trump proposed the 15 per cent corporate tax rate when he was running for office but many wondered how it could be achieved without raising the deficit.
The White House has yet to spell out how much of a hole the tax cuts could create in the federal budget.
Mr Trump’s ambitious plan alarmed politicans who worry about ballooning federal deficits.
Mr Trump sent his team to Capitol Hill on Tuesday evening to discuss his plan with Republican leaders.
“They went into some suggestions that are mere suggestions and we’ll go from there,” said Republican Senator Orrin Hatch of Utah, chairman of the Senate Finance Committee.
The White House’s presentation was “pretty broad in the principles,” said Marc Short, Mr Trump’s director of legislative affairs.
Republicans who slammed the growing national debt under US President Barack Obama have said they are open to Mr Trump’s tax plan, even though it could add trillions of dollars to the deficit over the next decade.
Echoing the White House, Republicans argue the cuts would spur economic growth, reducing or even eliminating any drop in tax revenue.
“I’m not convinced that cutting taxes is necessarily going to blow a hole in the deficit,” Sen. Hatch said.
“I actually believe it could stimulate the economy and get the economy moving,” Sen. Hatch added. “Now, whether 15 per cent is the right figure or not, that’s a matter to be determined.” The argument that tax cuts pay for themselves has been debunked by economists from across the political spectrum.
On Tuesday, the official scorekeeper for Congress dealt the argument – and Mr Trump’s plan – another blow.
The nonpartisan Joint Committee on Taxation said a big cut in corporate taxes, even if temporary, would add to long-term budget deficits.
This is a problem for Republicans because it means they would need Democratic support in the Senate to pass a tax overhaul that significantly cuts corporate taxes.
Republicans have been working under a budget maneuver that would allow them to pass a tax bill without Democratic support in the Senate, but only if it didn’t add to long-term deficits.
Senate Majority Leader Mitch McConnell said the Senate was sticking to that strategy.
“Regretfully we don’t expect to have any Democratic involvement in” a tax overhaul, Sen. McConnell said. “So we’ll have to reach an agreement among ourselves.”
Democrats said they smell hypocrisy over the growing national debt, which stands at nearly $US20 trillion ($27 trillion). For decades, Republican politicans railed against saddling future generations with trillions in debt.
But with Republicans controlling Congress and the White House, there is no appetite at either end of Pennsylvania Avenue to tackle the long-term drivers of debt, Social Security and Medicare. Instead, Republicans are pushing for tax cuts and increased defence spending.
“I’m particularly struck by how some of this seems to be turning on its head Republican economic theory,” said Sen. Ron Wyden of Oregon, the top Democrat on the Senate Finance Committee.